Question 1

Under the periodic inventory system:

Accepted Answer

A) the Inventory account is always up-to-date. 
B) the Purchases account is an asset account. 
C) an entry to credit Inventory must be made at the time a sale is recorded. 
D) an entry must be made at the end of the period to transfer Purchases to Cost of Goods Sold. 
A) the Inventory account is always up-to-date. 
B) the Purchases account is an asset account. 
C) an entry to credit Inventory must be made at the time a sale is recorded. 
D) an entry must be made at the end of the period to transfer Purchases to Cost of Goods Sold.

Question 2

The following data was obtained from the records of Ivanovich Artists,Inc. ,for the current year.Sales during the year were 400 units.
   Required:
1.Calculate the cost of the ending inventory using:
a.FIFO.
b.LIFO.
c.Average cost.Round average cost per unit to two decimal places.Round final answers to the nearest dollar.
2.Calculate the cost of goods sold by:
a.FIFO.
b.LIFO.
c.Average cost.Round average cost per unit to two decimal places.Round final answers to the nearest dollar.

Accepted Answer

1.100 units + 200 units + 100 units + 60

Question 3

How does the disclosure principle help financial statements users compare the financial statements of retailers,with regard to inventories?

Accepted Answer

The disclosure principle holds that a co

Question 4

Another term for gross profit is:

Accepted Answer

A) gross income. 
B) gross sales. 
C) gross margin. 
D) gross operating income. 
A) gross income. 
B) gross sales. 
C) gross margin. 
D) gross operating income.

Question 5

When inventory costs are falling,which inventory costing method minimizes the taxes paid?

Accepted Answer

A) FIFO 
B) LIFO 
C) average cost 
D) specific identification 
A) FIFO 
B) LIFO 
C) average cost 
D) specific identification

Question 6

Under the ________ method,ending inventory is based on the costs of the most recent purchases.

Accepted Answer

A) average-cost 
B) FIFO 
C) LIFO 
D) specific-identification 
A) average-cost 
B) FIFO 
C) LIFO 
D) specific-identification

Question 7

When inventory costs are decreasing,the LIFO costing method will generally result in:

Accepted Answer

A) a higher gross profit than under FIFO. 
B) a lower gross profit than under FIFO. 
C) a lower inventory value than under FIFO. 
D) the same inventory value as FIFO. 
A) a higher gross profit than under FIFO. 
B) a lower gross profit than under FIFO. 
C) a lower inventory value than under FIFO. 
D) the same inventory value as FIFO.

Question 8

In the periodic inventory system,the Inventory account is debited for the purchases made during the year.

Accepted Answer

A) True 
 B)False

Question 9

A periodic inventory system:

Accepted Answer

A) is used for inexpensive goods. 
B) is used when inventory cannot be controlled by visual inspection. 
C) keeps a running record of inventory on hand. 
D) is used for small,low-value items. 
A) is used for inexpensive goods. 
B) is used when inventory cannot be controlled by visual inspection. 
C) keeps a running record of inventory on hand. 
D) is used for small,low-value items.

Question 10

Ending inventory for the year ended December 31,2019,is understated by $8,000.How will this affect net income for 2019 and 2020?

Accepted Answer

A) Net income will be understated by $8,000 in 2019 and 2020. 
B) Net income will be overstated by $8,000 in 2019 and 2020. 
C) Net income will be understated by $8,000 in 2019 and overstated by $8,000 in 2020. 
D) Net income will be overstated by $8,000 in 2019 and understated by $8,000 in 2020. 
A) Net income will be understated by $8,000 in 2019 and 2020. 
B) Net income will be overstated by $8,000 in 2019 and 2020. 
C) Net income will be understated by $8,000 in 2019 and overstated by $8,000 in 2020. 
D) Net income will be overstated by $8,000 in 2019 and understated by $8,000 in 2020.

Question 11

Which of the following is NOT used to determine the cost of net purchases?

Accepted Answer

A) freight-out 
B) freight-in 
C) purchase returns 
D) purchase discounts 
A) freight-out 
B) freight-in 
C) purchase returns 
D) purchase discounts

Question 12

Bayer Company uses the periodic inventory system.Bayer Company sold goods on account with a retail price of $1,400 and a cost of $600.Which journal entry(ies)is(are)prepared?

Accepted Answer

A) debit Accounts Receivable for $1,400 and credit Sales Revenue for $1,400 
B) debit Accounts Receivable for $600 and credit Sales Revenue for $600 
C) debit Accounts Receivable for $1,400 and credit Sales Revenue for $1,400,debit Cost of Goods Sold for $600 and credit Inventory for $600 
D) debit Inventory for $600 and credit Purchases for $600 
A) debit Accounts Receivable for $1,400 and credit Sales Revenue for $1,400 
B) debit Accounts Receivable for $600 and credit Sales Revenue for $600 
C) debit Accounts Receivable for $1,400 and credit Sales Revenue for $1,400,debit Cost of Goods Sold for $600 and credit Inventory for $600 
D) debit Inventory for $600 and credit Purchases for $600

Question 13

On July 1,Corrao Company purchased $800 of inventory on account with credit terms of 3/10,net 30.Corrao Company uses the perpetual inventory system.On July 5,Corrao Company paid the amount due.What journal entry did they prepare on July 5?

Accepted Answer

A) debit Accounts Receivable for $800 and credit Cash for $800 
B) debit Accounts Payable for $800,credit Inventory for $24 and credit Cash for $776 
C) debit Purchase Discount for $24,debit Accounts Payable for $752 and credit Cash for $776 
D) debit Accounts Payable for $776 and credit Cash for $776 
A) debit Accounts Receivable for $800 and credit Cash for $800 
B) debit Accounts Payable for $800,credit Inventory for $24 and credit Cash for $776 
C) debit Purchase Discount for $24,debit Accounts Payable for $752 and credit Cash for $776 
D) debit Accounts Payable for $776 and credit Cash for $776

Question 14

The cost-of-goods-sold model can be used to estimate ending inventory.

Accepted Answer

A) True 
 B)False

Question 15

The average cost per unit is calculated as the cost of goods available for sale divided by the number of units sold.

Accepted Answer

A) True 
 B)False

Question 16

The journal entry to record the purchase of inventory on account under the periodic inventory system is:

Accepted Answer

A) debit Inventory and credit Accounts Payable. 
B) debit Purchases and credit Accounts Payable. 
C) debit Cost of Goods Sold and credit Accounts Payable. 
D) debit Inventory and credit Cost of Goods Sold. 
A) debit Inventory and credit Accounts Payable. 
B) debit Purchases and credit Accounts Payable. 
C) debit Cost of Goods Sold and credit Accounts Payable. 
D) debit Inventory and credit Cost of Goods Sold.

Question 17

The LIFO method assigns the most recent inventory cost to cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 18

An auto dealer uses a perpetual inventory system.The dealer incurred the following transactions during the month of May:
1.On May 1,the dealer purchased 10 vehicles on account at $20,000 each,with credit terms of 2/10,net 30.
2.On May 2,the dealer returned one vehicle due to a product defect.
3.On May 3,the dealer sold 5 vehicles for $25,000 each on account.The credit terms are n/30.No sales returns are expected.
4.On May 9,the dealer paid for the vehicles purchased less the return on May 2.
5.On May 31,the dealer collected one-half of the amount due from the May 3 sale.
6.On May 31,the dealer paid the rent for the next month of $2,500.
Required:
Prepare the journal entries for the dealer during the month of May.Explanations are not required.

Accepted Answer

The answer of An auto dealer uses a perpetual inventory...

Question 19

If ending inventory is understated for Year 1,then in Year 2:

Accepted Answer

A) cost of goods sold and gross profit will both be understated. 
B) cost of goods sold and gross profit will both be overstated. 
C) cost of goods sold will be overstated and gross profit will be understated. 
D) cost of goods sold will be understated and gross profit will be overstated. 
A) cost of goods sold and gross profit will both be understated. 
B) cost of goods sold and gross profit will both be overstated. 
C) cost of goods sold will be overstated and gross profit will be understated. 
D) cost of goods sold will be understated and gross profit will be overstated.

Question 20

On August 1,Savage Company purchased $2,100 of inventory on account with credit terms of 4/10,net 30.Savage Company uses the perpetual inventory system.On August 15,Savage Company paid the amount due.What journal entry did they prepare on August 15?

Accepted Answer

A) debit Inventory for $2,100 and credit Accounts Payable for $2,100 
B) debit Accounts Payable for $2,100,credit Inventory for $84 and credit Cash for $2,016 
C) debit Accounts Payable for $2,100 and credit Cash for $2,100 
D) debit Accounts Payable for $2,016 and credit Cash for $2,016 
A) debit Inventory for $2,100 and credit Accounts Payable for $2,100 
B) debit Accounts Payable for $2,100,credit Inventory for $84 and credit Cash for $2,016 
C) debit Accounts Payable for $2,100 and credit Cash for $2,100 
D) debit Accounts Payable for $2,016 and credit Cash for $2,016

Under the periodic inventory system:

How does the disclosure principle help financial statements users compare the financial statements of retailers,with regard to inventories?

Another term for gross profit is:

When inventory costs are falling,which inventory costing method minimizes the taxes paid?

Under the ________ method,ending inventory is based on the costs of the most recent purchases.

When inventory costs are decreasing,the LIFO costing method will generally result in:

In the periodic inventory system,the Inventory account is debited for the purchases made during the year.

A periodic inventory system:

Ending inventory for the year ended December 31,2019,is understated by $8,000.How will this affect net income for 2019 and 2020?

Which of the following is NOT used to determine the cost of net purchases?

Bayer Company uses the periodic inventory system.Bayer Company sold goods on account with a retail price of $1,400 and a cost of $600.Which journal entry(ies)is(are)prepared?

On July 1,Corrao Company purchased $800 of inventory on account with credit terms of 3/10,net 30.Corrao Company uses the perpetual inventory system.On July 5,Corrao Company paid the amount due.What journal entry did they prepare on July 5?

The cost-of-goods-sold model can be used to estimate ending inventory.

The average cost per unit is calculated as the cost of goods available for sale divided by the number of units sold.

The journal entry to record the purchase of inventory on account under the periodic inventory system is:

The LIFO method assigns the most recent inventory cost to cost of goods sold.

If ending inventory is understated for Year 1,then in Year 2:

On August 1,Savage Company purchased $2,100 of inventory on account with credit terms of 4/10,net 30.Savage Company uses the perpetual inventory system.On August 15,Savage Company paid the amount due.What journal entry did they prepare on August 15?

The Financial Statements

Transaction Analysis

Accrual Accounting Income

Internal Control Cash

Receivables and Revenue

Plant Assets, natural Resources, Intangibles

Current and Contingent Liabilities

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Investments

Time Value of Money

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Exam 6: Inventory Cost of Goods Sold

Under the periodic inventory system:

How does the disclosure principle help financial statements users compare the financial statements of retailers,with regard to inventories?

Another term for gross profit is:

When inventory costs are falling,which inventory costing method minimizes the taxes paid?

Under the ________ method,ending inventory is based on the costs of the most recent purchases.

When inventory costs are decreasing,the LIFO costing method will generally result in:

In the periodic inventory system,the Inventory account is debited for the purchases made during the year.

A periodic inventory system:

Ending inventory for the year ended December 31,2019,is understated by $8,000.How will this affect net income for 2019 and 2020?

Which of the following is NOT used to determine the cost of net purchases?

Bayer Company uses the periodic inventory system.Bayer Company sold goods on account with a retail price of $1,400 and a cost of $600.Which journal entry(ies)is(are)prepared?

On July 1,Corrao Company purchased $800 of inventory on account with credit terms of 3/10,net 30.Corrao Company uses the perpetual inventory system.On July 5,Corrao Company paid the amount due.What journal entry did they prepare on July 5?

The cost-of-goods-sold model can be used to estimate ending inventory.

The average cost per unit is calculated as the cost of goods available for sale divided by the number of units sold.

The journal entry to record the purchase of inventory on account under the periodic inventory system is:

The LIFO method assigns the most recent inventory cost to cost of goods sold.

If ending inventory is understated for Year 1,then in Year 2:

On August 1,Savage Company purchased $2,100 of inventory on account with credit terms of 4/10,net 30.Savage Company uses the perpetual inventory system.On August 15,Savage Company paid the amount due.What journal entry did they prepare on August 15?

The Financial Statements

Transaction Analysis

Accrual Accounting Income

Internal Control Cash

Receivables and Revenue

Plant Assets, natural Resources, Intangibles

Current and Contingent Liabilities

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Investments

Time Value of Money

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